Does a couple with no kids need term life? Questions answered

Often the answer for a childless couple is "less than a family would need, but not always nothing." Term life insurance exists to replace what other people would lose if you died. When no children depend on you, the list of people who would lose something is shorter, and the question becomes whether your partner, a co-signer, a business or a parent is on it. The questions below work through that list one at a time, with the situations where the honest answer is no and the ones where it is yes.

The short version before the details

Two adults with no dependents, solid savings, two comparable incomes and no shared debt can reasonably carry little or no term life insurance. Change any one of those four conditions and the picture shifts. The sections that follow take each condition apart.

Every example below is a hypothetical household with round numbers chosen to show the arithmetic. None is a price quote.

Income and housing questions

What does term life insurance actually replace?

It replaces money that someone else was counting on. That might be a paycheck that pays a mortgage, a share of rent, a business partner's buyout or a co-signed loan. It does not replace a person's worth, and it is not required just because you are married. If your death would leave your partner financially unchanged, or only mildly inconvenienced, there is not much for a policy to do.

The cleanest way to test this is to ask the same question about each of you: "If this person died next month, what bills would be hard to pay, and for how long?" Write the answers down. The rest of this article is a set of ways to answer that question honestly.

We both earn about the same. Do we each still need a policy?

Possibly not, and this is the strongest case for skipping coverage. If each of you earns enough to live on alone and you have no debts tied to the other person, the survivor's budget gets easier, not harder, because one person is now covering one person's costs.

Run a quick check. Say Maya and Jordan each earn $70,000 and share a rent of $2,000 a month. If either died, the survivor would face the whole rent and the loss of the other's half of everything else. Their combined living costs are $5,500 a month. Alone, the survivor's costs might fall to $3,500 a month, which is $42,000 a year against a $70,000 income, before tax. They would be tighter on the rent for a year or so but not in crisis. A policy would be a small convenience, not a necessity.

Where this reasoning fails is when a fixed cost does not shrink. A mortgage payment is the same whether one or two people live in the house. If the household was set up so that the mortgage requires both incomes, the picture changes. That is the next question.

We have a mortgage that needs two incomes. What then?

Then the survivor either carries it alone, sells or needs help, and that is a real risk worth insuring. The size of the need is about the balance you would want paid off, or at least the number of years of the difference between one income and the payment.

A simple version: Say Priya and Sam owe $280,000 on a mortgage with a payment of $2,300 a month. Priya earns $90,000 and Sam earns $60,000. If Priya died, Sam's $60,000 would be hard pressed to carry $27,600 a year of mortgage payments plus taxes, insurance and everything else. Options are a policy that pays off the mortgage, a policy that covers a few years of the gap, or accepting the risk of selling. A level policy of $280,000, or something near it, to match the balance gives Sam the choice to stay.

A few notes on this:

• Match the length of the policy to the mortgage's remaining years. A mortgage that will be paid off in 18 years is matched by a 20-year policy, not a 30-year one. See the using term life insurance to cover a mortgage guide.
• A policy that pays off the debt in a lump sum is different from "mortgage protection" insurance sold by lenders. The mortgage protection insurance vs term life guide explains why the difference matters.
• You may want more on the higher earner and less on the lower earner, but an income that looks small can still be what makes the payment possible.

One of us earns most of the income. Is that different?

Yes, it is the most common reason a couple with no children needs coverage. When one partner earns most of the money, the other depends on that income, and the dependence runs one way.

Say Dana earns $120,000 and her husband Luis earns $30,000 from part-time work. Their expenses are $6,000 a month. If Dana died, Luis's income would cover well under half of what they spend. They would need to cut costs, find more work, or draw on savings. A policy on Dana helps Luis cover the transition. How much depends on how long he would need: a year or two while he retrains, or the rest of his working life.

A common rough method is to multiply the income that would be lost by the number of years of support the survivor needs, then subtract savings that could be used. The The DIME method for sizing life insurance guide shows a standard approach. The How much life insurance do I need? lets you try different numbers. For Dana and Luis, a figure of several hundred thousand dollars might be a reasonable result. For the same household, a policy on Luis may be small or unnecessary, because his death would not change the household budget much. Insure the person whose income others depend on first.

What about a partner who stays home or works part-time by choice?

The partner who earns little still has economic value if their work would have to be bought. The question is whether the household would pay for that work if they were gone. For a childless couple, the value is usually smaller than for a family: no child care, no after-school coverage. It may include care for an elderly relative, a family business role, home management that would be outsourced, or a spouse's unpaid support for the other's career.

If the answer is "not much would change", a small policy that covers final costs and a few months of adjustment may be enough. If the answer is "we would hire help", price it as a number of years. The human life value: the economist's way to size coverage guide has more.

Debts, co-signers and business

Do we need coverage for our debts if we have no kids?

Not automatically. Debts that are in one person's name alone generally are paid out of that person's estate and then, in most cases, stop. They do not usually pass to a surviving spouse who did not sign. The exceptions matter, and they are where the insurance question lives:

• Joint debts. If you both signed, the survivor still owes the whole amount. A mortgage, a car loan, a personal loan and a credit card account you both hold are the usual examples.
• Co-signed loans. If you co-signed a private loan for a sibling, a friend or a child of a relative, you are legally on the hook if the borrower dies or stops paying.
• Community property states. In some states, debts taken on during a marriage may be reachable through shared property even when only one spouse signed. The rules vary, so ask a local attorney.

The what happens to your debt when you die guide goes through what happens to each kind of debt, and what happens to student loans when you die covers the special rules for those loans.

A useful exercise: list every debt, mark whose name is on it, and mark who would be responsible if you died. Total the amounts that would fall on a survivor. That total is your debt-based floor for coverage.

We co-signed a loan for someone else. Does that change things?

It can change the answer significantly, because a co-signed debt is a liability you chose without receiving the asset. If your death or your partner's would leave the other person responsible, or if your death would leave a family member unable to pay, a policy sized to that loan may be sensible.

Consider an example. Say Chris and Ellen co-signed a $40,000 private loan for Chris's younger brother. If the brother stops paying, both are responsible. If Chris died, Ellen would remain liable. A $40,000 term policy that runs until the loan is paid off is one way to cap that risk. The other is to ask the lender about release options or to refinance in the borrower's name alone.

One of us owns a business. Does that change the answer?

Yes, and it often raises it. A business owner's death can leave a partner, a lender and a spouse all exposed at once. Three situations come up:

1. The spouse is a co-owner. Without a plan, the survivor may suddenly own a business with a deceased person's heir, or lose the business entirely. A buy-sell arrangement funded by insurance addresses this. See funding a buy-sell agreement with life insurance.
2. The owner personally guaranteed business debt. A personal guarantee on a bank loan or a lease creates a debt that may land on the estate and on the spouse. The Life insurance for an SBA loan guide describes the common lender requirement.
3. The business depends on one person. If the business would lose most of its value without the owner, life insurance for small business owners and key person coverage are the usual tools, with the business as the policy owner and beneficiary.

For a childless couple, the business may be the largest asset they own, which makes this the question most worth discussing with an attorney and an accountant.

Final costs, benefits and relatives

What will our funeral and final expenses cost?

Funerals cost thousands, sometimes well into five figures, and the bill arrives within days. The what a funeral costs and how families pay for it guide breaks down typical items. For a couple with healthy savings, this is not a reason to buy a policy; it is a number the survivor can cover from cash. For a couple with thin savings, even a small term policy or a savings account earmarked for it can keep the survivor from borrowing.

Add to that the first-year costs of a death: final medical bills not covered by insurance, legal fees and travel. A cushion of a few months of expenses is a reasonable thing to hold, in a policy or in a savings account.

What would Social Security and employer benefits provide?

A childless couple should not count on much from the government. Social Security survivor benefits exist for eligible spouses, children and dependent parents, and there is a one-time death payment of $255. A surviving spouse without children in their care generally does not receive monthly benefits until they are close to retirement age, so a younger survivor gets very little in the early years. Ask the Social Security Administration for current amounts, and see Social Security survivor benefits and the $255 death payment.

Employer group life, often one or two times salary at no cost, may cover part of the need, but it generally ends when the job does. Treat it as a bonus, not a base. If your employer's group coverage is your only life insurance, note what happens if you change jobs, a gap that the the life insurance coverage gap: who is underinsured and why guide describes.

What about supporting a parent or another relative?

If you help support a parent, a sibling or an adult relative with a disability, and that support would end if you died, they belong on your list. Coverage is more complicated here: the aim is usually to provide a stream of support, and sometimes a trust set up by an attorney is the right container. A parent living with you whose care you pay for is a concrete need. A parent who is fully independent is not.

In that case, name the person as beneficiary only after you have thought through whether they can manage a lump sum, and talk to an estate attorney about special needs trusts when a relative receives means-tested benefits, because a direct payment can affect eligibility.

Making the call

Should I get a policy now because it will be cheaper than later?

Age and health are two of the biggest drivers of price, so buying younger is usually cheaper per year and the price is locked for the term. That is a point in favor of buying early, but it is not a reason to buy something you do not need. The cost of waiting is real if your health changes, and the guide on the the cost of waiting to buy life insurance covers it. The cost of buying an unneeded policy is the premiums paid for years.

A reasonable approach for a couple on the fence is to buy a modest policy sized to the one clear need, such as the mortgage, and revisit when something changes. A 20-year level policy sized to a debt, with a conversion right, preserves the option to buy more later.

What are the situations where the answer is clearly no?

The answer is likely no, or "very little", when all of these hold:

• Each person earns enough to live on alone, or the survivor would be comfortable on savings.
• No joint or co-signed debt that the survivor could not carry.
• No business or family member depending on either person.
• Savings or other assets that cover funeral costs and a transition period.
• No expected change, such as a plan to buy a house on one income.

You may still want coverage for peace of mind, but that is a preference, not a financial need. It is reasonable to decline.

What are the situations where the answer is clearly yes?

The answer is likely yes when one or more of these hold:

• A mortgage or other joint debt the survivor could not carry alone.
• One person earns most of the money and the other has no strong income of their own.
• A business, partnership or personal guarantee that creates risk.
• Co-signed loans for other people.
• A relative who depends on your support.
• Little savings, so that even a few months of lost income would cause hardship.

How do we decide how much, and for how long?

Put the pieces together with a short worksheet:

1. Debts the survivor would owe: mortgage balance, joint loans, co-signed loans.
2. Income gap: the annual shortfall if one income disappeared, times the number of years you want to cover.
3. Final costs: a round figure for funeral and first-year expenses.
4. Subtract savings and other assets you would be comfortable using, and any employer coverage you are confident will exist.

For example, suppose Dana and Luis add up a $250,000 mortgage, a shortfall of $30,000 a year for five years ($150,000) and $15,000 for final costs. That is $415,000. They have $60,000 in savings they would use, so their number is $355,000, and they might round to $350,000 or $400,000 and compare prices. Their policy's term would match the mortgage and the number of years they need support, which might be 20 years.

Treat the result as a range. The life insurance for married couples guide has more detail, and a licensed agent or a fee-only planner can help you check your numbers. Each partner should be evaluated separately, because the two answers are often very different.

Key takeaways

• Without children, the need for term life comes from shared debts, income dependence, a business or relatives you support, not from marriage itself.
• Two comparable incomes, no joint debt and decent savings can mean little or no coverage is needed.
• A mortgage, a co-signed loan or a one-income household usually justifies a policy on the person whose death would hurt most.
• Size each partner's policy separately, and match the term length to the debt or the years of support.
• Social Security and employer group coverage are limited for a childless survivor, so do not count on them.